Why Palantir Stock Is Plummeting This Week

Shares of Palantir (NASDAQ: PLTR) are seeing big sell-offs in this week's trading. The stock's price is down 14.6% from last week's market close, according to data from S&P Global Market Intelligence.

Meanwhile, the S&P 500 index is down 0.4% over this stretch, and the Nasdaq Composite index is down 0.7%. The market is closed today in remembrance of President Jimmy Carter.

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Macroeconomic conditions and indicators have shifted in a more bearish direction this week, spurring big sell-offs for Palantir and other growth stocks. The software specialist's valuation also took a step back due to bearish analyst coverage.

Palantir stock slips on macroeconomic risks

Palantir and other high-profile artificial intelligence (AI) stocks are seeing big sell-offs this week amid a combination of macroeconomic catalysts. Recent survey data from the Bureau of Labor Statistics showed that there were more new job openings than expected in November, which raised concerns that inflation could still be trending hotter than anticipated.

Adding another bearish pressure, there were reports yesterday that President-elect Trump could declare a national emergency upon entering office in order to rapidly roll out high and wide-ranging new tariffs on foreign imports. U.S. Treasury yields have also been on the rise this week, which tends to be a particularly bearish catalyst for stocks with growth-dependent valuations.

Deutsche Bank stays bearish on Palantir

On Wednesday, Deutsche Bank published new bearish coverage on Palantir stock. Although the bank raised its one-year price target on the software specialist's stock from $26 to $35, it maintained a sell rating on the stock. As of this writing, Deutsche Bank's new price target implies additional downside of 47%.

The bank is bullish on the broader AI software space in 2025 thanks to improving fundamentals and the potential for modest multiple expansion, but it has valuation concerns about Palantir. The company has been serving up impressive growth, but it's valued at roughly 44.5 times this year's expected sales and roughly 143 times expected earnings.

With that kind of highly growth-dependent valuation, the stage could be set for big sell-offs if performance comes in below expectations, or if macroeconomic conditions take a turn for the worse.

On the other hand, Palantir has established leadership positions in corners of the AI software market that look poised for huge growth over the long term, and its stellar profit margins could help it grow into and exceed its current lofty valuation.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.